SMTP, Inc. (OTCQB: SMTP)
Delivering growth and dividends
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 1
Safe Harbor Statement
The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words "may," "will," "should," "plans," "explores," "expects," "anticipates," "continues," "estimates," "projects," "intends," and similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties include, but are not limited to, general economic and business conditions, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing new customer offerings, changes in customer order patterns, changes in customer offering mix, continued success in technological advances and delivering technological innovations, delays due to issues with outsourced service providers, and various other factors beyond the Company's control.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 2
Overview
SMTP has provided cloud-based email delivery solutions for over a decade, with a strong history of profitable growth.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 3
Revenues (TTM) $5.5M
Sales Model Cloud-based subscription business for over 10 years, with thousands of customers (and no customer >2% sales)
Global Sales Reach Roughly 50% of sales are outside the U.S. (SMTP serves over 130 countries)
Footprint Headquartered in U.S., with the majority of technical development and service based in the Ukraine
Dividends History of steady dividends (current yield ~ 8%), along with a track record of profitable growth
Returns(TTM) ROA 94% and ROE 164%
SMTP Facts & Figures
Financial Highlights (ttm)
Revenue $5.5M
EBITDA $2.0M
Net Income $1.2M
Profit Margin 22%
Operating Margin 35%
Total Cash $0.9M
Total Debt -
Return on Assets 94%
Return on Equity 164%
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 4
Stock Highlights (as of 10/11/13)
Price 1.06
Market Cap $16.0M
Trailing P/E 13.25
EV/EBITDA 7.86
Shares Outstanding 15.09M
Float 1.75M
Avg. Vol. (3 mo) 14,449
Diluted EPS 0.08
Dividend Yield (trailing annual)
7.1%
SMTP, Inc. (SMTP) – OTC QB
Source: CapitalIQ
Customer Solutions
Internet Service Providers (ISP’s) have put in place a wide variety of sophisticated filters to stop SPAM.
But as a result, legitimate companies face real problems sending large volumes of email:
• Bounces • Complaints • Blacklisting
One of the primary factors considered by ISP’s in evaluating emails is the reputation of the sending server.
SMTP’s trusted servers, our 10 years of cloud-based experience, and our proactive monitoring allow us to get our client’s email to the inbox, resulting in loyal customers and a stable, recurrent-revenue base.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 5
How we work
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 6
A Return Path study found that 83% of deliverability issues are caused by sender reputation. Our delivery services can boost customers inbox delivery by 10-20%.
Customers send us emails for distribution
Our trusted servers relay the emails to consumer inboxes, while we manage issues of deliverability, bounces and blacklisting with ISP’s.
Points of Differentiation
Growing businesses sending opt-in emails can experience delivery losses of 20-30% if they try to send their emails themselves. Small businesses may use do-it-yourself email platforms like Constant Contact, which tend to focus on content creation. But as they scale up, businesses typically run into three problems: 1. High costs for delivery of large volumes 2. Increasing concerns with bounces and complaints 3. Limited support for issues related to email delivery
SMTP’s customers care deeply about ensuring their e-mail reaches the intended recipient and often require extensive service and support.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 7
Market Opportunity
Email Marketing is a rapidly-growing $2B industry.
SMTP focuses on the email delivery the largest and fastest growing segment of the market. We will benefit from leveraging our position in delivery by adding related services for clients. SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 8
Key Company Assets
Market Reputation
A brand name synonymous with email itself (SMTP stands for Simple Mail Transfer Protocol, the protocol used for all email)
Large and well-established recurrent-revenue client base
Excellent reputation for service and customer support
Proprietary Company Capabilities
Over a decade of cloud-based email delivery experience
Robust technical infrastructure (billions of emails sent)
Pool of IP addresses trusted by Internet Service Providers
Highly capable, cost-effective 24x7 global service team providing strong English & multi-lingual support, along with deep technical experience
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 9
Competitive Landscape
SMTP excels in customer service for deliverability issues, with a cost-effective multi-lingual service organization providing global support.
This team has been in place for over a decade, and is one of the largest teams in the industry exclusively focused on deliverability. SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 10
Segment Marketing Email Creation
Marketing Email Delivery
Transactional Email Delivery
Example Companies
Constant Contact MailChimp
Campaigner
SMTP TurboSMTP
SendGrid Amazon
Dyn
Primary Focus Customer Relations
Focus on Ease of Creating Attractive Emails
Graphical interfaces for numerous small senders
Focus on Deliverability and Customer Service
High level of client
interaction and support
Focus on API’s (Application
Programming Interfaces)
Highly automated with minimal interaction
Profitable Base for Growth
Strong revenue growth
Consistent earnings growth
Margins healthier than for other players in the industry
(E.g. Constant Contact is at <5%)
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 11
805 1,549
2,736
4,279 5,353
0
1,000
2,000
3,000
4,000
5,000
6,000
2008 2009 20102 2011 2012
History of Revenue Growth
2008 2009 2010 2011 2012 1Q 2013 2Q 2013
Net Revenue $805 $1,549 $2,736 $4,279 $5,353 $1,370 $1,395
Growth % 93% 77% 56% 25% 2%
Gross Profit $628 $1,131 $2,097 $3,456 $4,076 $1,048 $1,092
Gross Margin 78% 73% 77% 81% 76% 77% 78%
Operating Income ($196) $109 $742 $1,576 $1,714 $375 $577
Operating Margin -24% 7% 27% 37% 32% 27% 41%
Growth, with dividends
SMTP’s goal is to provide investors with strong risk-adjusted returns. The company has an established history of profitable operation, with a proven, subscription-based revenue model. SMTP is debt-free and has minimal concentration of risk in any customer (largest customer is less than 2% of revenues). Our practice has been to return 80-90% of cash flow from operations to investors via healthy dividends every quarter, with such payments reduced by any expected cost increases in the coming quarter. SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 12
The Opportunity
SMTP has three clear opportunities to drive significant growth:
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 13
These initiatives represent modest investments to strengthen our core team and product offering. In addition, the company will revisit strategic options, such as channel partnerships and/or potential acquisitions of affordable firms with a complementary position.
Quantitative Marketing, leveraging a team with a strong record for rapidly driving results, and with a clear focus on specific verticals
International Growth, driven by localizing sales & marketing for high-growth regions
Launching new products & features, including integrated solutions that open up significant opportunities for new customers.
Quantitative Marketing
SMTP’s growth has historically been a function of its internationally recognized brand and its reputation for stellar customer service.
The company has recently strengthened its team and is pursuing focused efforts in quantitative marketing, including:
Deeply analytical market segmentation
Targeted messaging for key segments
Cost-effective lead acquisition
Optimized online lead conversion
Quantitative lead ranking for inside sales prioritization
The team has a track record in prior firms of having rapidly reduced customer acquisition costs and driven significant revenue growth.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 14
SMTP’s brand is already globally recognized, due to the universal adoption worldwide of the Simple Mail Transfer Protocol. The company is well positioned for global expansion: Active customers in over 130 countries 50% of sales sourced internationally Multilingual 24x7 service team
The company’s plans include: Localizing web content regionally Emphasizing support in the local tongue Providing dedicated support for key global accounts
International Growth
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 15
Product Roadmap
Our vision is to provide an integrated suite of solutions, leveraging our robust delivery capabilities to deliver compelling business value
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 16
Original Capabilities Core deliverability Added Capabilities PreviewMyEmail Email Marketer (paid editor)
Potential Enhancements Campaign Management Analytics Portal Customer API’s Campaign Optimization Professional Services
These solutions open a range of new market opportunities, including: • High-volume senders currently utilizing more costly integrated platforms,
such as Constant Contact and MailChimp • Clients requiring sophisticated integration via API’s • Customers requiring improved analytics for campaign visibility
Criteria for Acquisitions
SMTP will continue to explore opportunities for strategic acquisitions, meeting the following criteria:
Providing a complementary technology or service
Providing direct access to a new customer base
Providing a distinct channel to a market
Accretive to earnings and business value
Well-understood integration path
Affordably priced
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 17
Ruslan Bondarev Chief Technology Officer
• Over 10 years of experience in the cloud-
based delivery of email services • Expert in email protocols and data
exchange, with deep technical experience across a wide variety of relevant systems/technologies
• Passionate about solving complex tasks and delivery challenges
Jonathan Strimling Chief Executive Officer
• 20 years of experience as an executive
and as an entrepreneur focused on technology commercialization
• Former CEO of US Dynamics, American Biomass Corporation/ WoodPellets.com, and other ventures.
• Prior senior operating roles with American Industrial Partners and GE
• Track record of driving strong growth, including achieving nearly 400% growth annually for two consecutive years
• Drove prior firm to achieve 98% customer satisfaction ratings and a BBB “perfect record” award
• Direct prior experience as an online retailer with cloud based email services
• Dual Masters degrees in Management and Engineering from M.I.T.
Paul Parisi Vice President of Innovation
• Over 25 years of senior technical work in
software and systems development • Unusual blend of technical skills with
customer-focused business experience • Former CTO of HealthConnected/Cloud
Industries Health, LocalGinger • Robust portfolio of issued and pending
patents covering various IT systems
Max Ilin Vice President of Cust. Service
• Over 5 years of experience in providing
support for cloud based email delivery • Created highly-responsive and customer-
service oriented 24x7 support center • Strong technical experience with both
email delivery and supporting systems
Decades of cloud based email delivery experience. A track record of strong and profitable growth.
Yvonne Gaudette Vice President of Marketing
• 20 years of experience in marketing and
as a communications executive from VC-backed startups to Fortune 500 firms.
• Former Director of Marketing for RatePoint, Vivox, and other ventures
• Track record of driving highly successful product launches and rapidly and inexpensively acquiring new customers.
Leadership Team
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 18
McConnell Jones Lanier & Murphy Auditors
• SEC Services Group focused on serving
publicly traded midsize and emerging growth companies with SEC compliance
• Experience with over 100 SEC registrants, supported by partners with former “Big Four” accounting experience
• Broader business experience from a range of consulting and advisory roles
Semyon Dukach Chairman
• Acquired controlling stake in SMTP Inc.
in 2002, and grew steadily and profitably, taking public in 2011
• Set precedent for a steady flow of dividends from SMTP in 2012
• Cofounded Fast Engines, Vert, Global Cycle Solutions, PDFFiller and East of Air
• Prolific angel investor, with investments in over 60 firms across a range of industries and technologies
• Wide ranging business experience across a range of ventures and technology
• Deep technical experience, including developing an early internet payment protocol in 1991 at MIT
• MS in Computer Science from MIT; BS in Computer Science from Columbia
Rens Troost Director
• Chief Executive Officer at Virtual Clarity,
a firm focused on helping enterprises virtualize their entire IT infrastructure
• Former Executive Director, Head of Core Technology Architecture at UBS, AG and Founder and Former CTO of Name, Inc.
• Expert in cloud computing, IT infrastructure, and business strategy
David M. Bovi, PA Attorney
• 20 years of transactional corporate and
securities law experience • Experience across a range of public and
private capital raising transactions, M&A, and general corporate business.
• Masters Degree in Securities Regulation, Georgetown University Law Center
SMTP Board of Directors brings extensive experience in technology.
Vadim Yasinowsky Director
• Chief Executive Officer at PDFFiller.com,
a rapidly growing, cloud-based provider of document completion services
• Former CTO at FurnitureFan.com and prior founder of ClearWeb.com
• Veteran of technology development and deeply experienced with the effective marketing of software products
Governance
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 19
Experienced auditors & counsel.
Outstanding Performance
SMTP’s performance compares quite favorably within the industry1
SMTP leverages its SMTP brand, its cost-effective operations, and its proven team to deliver outstanding financial returns. Furthermore, the stock remains modestly priced, relative to others in the industry, even before factoring in earnings growth trends.
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 20
1Figures on all firms based on TTM through Q2 2013; EV/EBITDA ratios as of 10/12/2013 (Data from CapitalIQ)
Revenues (TTM)
Net Income (TTM)
Profit Margins
(TTM)
Quarterly Earnings Growth
(yoy)
Return on Assets (TTM)
Return on Equity (TTM)
Enterprise Value / EBITDA (TTM)
Constant Contact 269M 12.6M 4.7% N/A 0.5% 6% 30.72
Responsys 183M 5.37M 2.9% N/A 2% 3% 42.73
SMTP 5.52M 1.24M 22.4% 60% 94% 164% 7.9
Further Information
Alena Chuprakova SMTP, Inc. 877-705-9362 [email protected] http://www.smtp.com Paul Kuntz RedChip Companies, Inc. Tel: +1-800-733-2447, ext. 105 [email protected] http://www.redchip.com
SMTP Inc. | www.smtp.com | OTCQB: SMTP October 2013 | Page 21